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Milestones : Outsourcing Myths Dispelled

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Outsourcing has gone in and out of fashion, with various studies debating the pros and cons of farming out business processes to a third-party provider. Yet a study commissioned by Accenture dispels some commonly held beliefs among finance directors that outsourcing of finance functions decreases control over governance and compliance.

The study of more than 200 finance officers and directors, conducted by the Economist Intelligence Unit on behalf of Accenture Finance Solutions, found that in just over half of those surveyed concerns over companies’ ability to maintain governance and compliance had prevented them from outsourcing finance functions. But of those companies that had made the leap of faith, 43% reported that outsourcing had improved governance and compliance, with an additional 44% stating that it had not had an adverse impact on existing processes.

But how can outsourcing a finance function to a third party enhance governance and compliance? By way of explanation, 73% of those companies that had outsourced said it helped define business processes more clearly, leading to greater clarity and accuracy of financial figures. Additionally, more than 50% of companies said outsourcing providers were better placed to deal with changes to accounting and tax codes and provided greater transparency of information and business processes. Commenting on the findings, Barbara Duganier, vice president, Accenture Finance Solutions, says that it indicates a significant shift in mindset by companies that had decided to outsource, a trend she expects will continue.

But for an outsourcing relationship to work effectively, an overwhelming majority of companies (82%) stated that service-level agreements needed to be put in place, which allowed companies to define core financial processes and compliance requirements. Monitoring mechanisms such as assigning clear lines of responsibility and systematic reporting, as well as penalties for non-compliance, are also essential.

Yet not all finance functions lend themselves to outsourcing, with 81% of companies indicating that budgeting and forecasting should be maintained in-house alongside treasury and cash management (71%). And with regulatory measures such as Sarbanes-Oxley placing additional pressure on companies to implement financial controls, 39% of companies said such legislation meant they were less likely to outsource finance functions.